THE GAP INC

About THE GAP INC

The ubiquitous clothing retailer Gap has been filling closets with jeans and khakis, T-shirts, and poplin since the Woodstock era. The firm, which operates about 3,750 stores worldwide, built its iconic casual brand on basics for men, women, and children, but over the years has expanded through the urban chic chain Banana Republic, family budgeteer Old Navy, online-only retailer Piperlime, and Athleta, a purveyor of activewear. Other brand extensions include GapBody, GapKids, and babyGap; each also has its own online incarnation. All Gap clothing is private-label merchandise made exclusively for the company. From the design board to store displays, Gap controls all aspects of its trademark casual look.

Geographic Reach

The Gap rings up about 85% of its sales in North America. Asia, including Japan and China, is the retailer's second biggest market accounting for about 10% of sales, followed by Europe (the UK and Ireland, France, Italy) contributing about 5%. Gap has 450-plus franchise stores across Asia, Australia, Eastern Europe, Latin America, the Middle East and Africa.

Sales and Marketing

The company communicates with consumers mainly through television and print advertising. Its advertising expenses $578 million, $639 million, and $637 million in fiscal 2016, 2015, and 2014, respectively. The Gap has expanded its digital capabilities and the company now offers services such as order-in-store, reserve-in-store, find-in-store, and ship-from-store.

Financial Performance

After reporting a record-setting $16.4 billion in revenue for fiscal 2015 (ended in January), Gap saw its revenues drop 4% to $15.8 billion in fiscal 2016. Its profits also plunged 27% from $1.3 billion in 2015 to $920 million in 2016, and its operating cash flow dropped by 25% during that same time period.

The decrease in net sales for 2016 was primarily at Gap and Banana Republic as a result of the closure of about 150 global specialty stores; this was partially offset by an uptick in net sales from Old Navy. It also experienced an unfavorable impact of foreign exchange rates driven by the weakening of the Canadian dollar and Japanese yen against the US dollar.

Strategy

Gap is working to improve its business performance as it has announced plans to close about 175 Gap brand specialty stores in North America and a limited number of stores in Europe and Asia over the next few years. Adhering to this strategy, it closed about 150 stores in 2015.